Article - Steps for Value-Based Contracting

Healthcare organizations or providers have established the infrastructure and workflows to support value-based care. However, most respondents to the latest Value-Based Care Assessment from Insights said over 75 percent of their organization’s revenue is from fee-for-service contracts hence Fee-for-service contracts pose real challenges to value-based contracting, especially for physician practices. The adoption of value-based contracting is rising in the US for various benefits.

Let’s understand what value-based contracting is? and its benefits:

Value-Based Contracting

The US health care system is going through a volume-to-value transformation to control cost and improve patient outcomes with value-based contracting services and health care reimbursement models.

Now that you know a little more about value-based contracting, let’s look at the benefits of this payment model in more detail. The important benefit is value-based contracts limit the payer’s exposure to financial risk by providing price reductions or refunds for ineffective treatment. Now let’s look at other Key Benefits:

Improvement in patient outcomes 

If payers can provide access to a greater range of medicines (since manufacturers are reducing their risk of exposure to sub-optimal outcomes), patient outcomes could improve.

Reduction in medical costs 

Value-based contracting could lead to a reduction in medical costs through a reduction in hospitalizations, emergency room visits by helping to control diseases better.

Reduction in the cost of medicines 

Under value-based contracting, manufacturers may pay higher rebates for patients who don’t meet the agreed-upon outcome targets, which may potentially reduce the cost of medicines.

While talking about value-based contracts, it comes in all shapes and sizes, from pay-for-reporting to bundled payments for episodic care to full capitation for patient populations.

Organizations are implementing value-based contracts solely depends on the type of care they deliver, the market in which they reside, and their patient population. Let’s look at various steps in detail.

Steps for Value-Based Contracting


Only signing the contract is not sufficient for money-making which is the conception among most physicians. However, you need to make sure that you will eliminate all the inefficiencies of healthcare which leads to save money and achieve quality goals. So that's the first thing: a very honest commitment.

Physicians Engagement

Physician engagement is the second step that results in value-based care. Physicians can lead other physicians much better and guide other physicians’ who may be worried about taking the risk of being in a value-based arrangement. Hence physician and clinician engagement is the secret sauce to value-based success regardless of the complexity of the value-based contract.

Partnerships and Networking

Networks and partnerships are key because organizations cannot do value-based care by themselves. Partnerships and networking help to create the right alignment in the community with physicians, with other clinical providers, with hospital systems, with payers, with post-acute, with home health, and bring all stakeholders together for a common purpose.

Financial Assessment

You need to consider the financial component of value-based contracts by creating some financial modeling of the population you think you're going to get in that value-based arrangement. Moreover, you need to consider various factors like resources that you need to manage those medical and administrative costs of that population that you might get.

Finally, risk appetite, infrastructure, and clinical engagement are all key to the value-based contracting process. With the help of the above factors leaders should assess their organization’s capabilities and decide to engage with a payer to put a value-based contract in place.

Now you have understood the steps for value-based contracting. Let’s evaluate the success of value-based contracts in the following brief.

Evaluating the success of value-based contracts

Cost Savings

Medicare contracts are concerned about cost savings. For example, if your ACO satisfies or exceeds quality measurements along with saves money in the Medicare Shared Savings Program which covers the added costs of the value-based infrastructure then your ACO contract has been a success.

Financially solvency

You need to have financial solvency which requires maintaining a margin of profitability to add more patients to the value-based care model. However, some other factors to consider include provider satisfaction with the contract, physician growth in the organization, and patient as well as employer satisfaction with the care delivered per the contract.

Quality improvement

Quality improvement is another obvious factor. Value-based contracts only work when organizations notice a significant improvement in quality metrics agreed upon by the practice and the payer. Noticeable decline in quality performance may initiate change and possibly another round of negotiation.

If you want to know more, you can get in touch with us. We are a leading medical billing and coding company providing services across the US. 

Published By - Medical Billers and Coders
Published Date - Jun-03-2021 Back

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